But that's where the agreement ends between state Comptroller Thomas DiNapoli and fiscal watchdogs about the huge taxpayer liability for public-sector retirees' health care and other postemployment benefits.

Mr. DiNapoli on Monday announced legislation to help state and local governments in New York pay those costs, which he estimated at $136.5 billion. He essentially wants governments to invest money as they do to pay pension benefits.

"Comptroller DiNapoli's proposal brings to mind the old saying that, to a man with a hammer, everything looks like a nail," grumbled E.J. McMahon, who runs the Albany-based Empire Center for Public Policy. "The comptroller has a pension fund, and his solution to this retiree health care problem is what amounts to another pension fund."

The New York City-based Citizens Budget Commission cheered Mr. DiNapoli's idea while deeming it insufficient.

"It's good for the comptroller to be raising this as an issue and offering state and local governments a vehicle to pay for these liabilities," said Maria Doulis, director of city studies at the commission.

The two watchdogs concur that setting money aside won't be nearly enough. The commission and the Empire Center both view reducing costs as essential. Mr. DiNapoli, who enjoys political support from public-sector unions, made no mention of benefit cuts in his press release Monday.

Ms. Doulis noted that New York City's public employees continue to get 100% taxpayer-funded health care throughout their retirement. If they get another job that offers benefits, the city still insures them—and their families. Even when Medicare kicks in at age 65, their supplemental payments are covered by the city. State-government retirees pay a portion of their premiums, as they do in most of the nation's states and localities.

While public-pension benefits are protected by the state constitution in New York, other retiree benefits such as health insurance are not, meaning it would be easier for legislators to alter them. But there has been virtually no talk among elected officials about doing so, despite New York state government's unfunded liability of more than $53 billion being greater than all but California's. Thirty-three other states have mechanisms to fund future nonpension retiree costs. New York governments budget to pay for the benefits only as the costs are incurred.

Three years ago, Mr. McMahon's Empire Center estimated New York governments' unfunded liability for retiree health insurance at $250 billion, nearly twice the comptroller's current figure. Mr. McMahon said Mr. DiNapoli's analysis didn't estimate beyond what larger governments in New York have reported. New York City's liability is nearly $12 billion more than its annual budget, which will be nearly $78 billion next fiscal year.

The comptroller's proposal "is not going to solve the problem," Mr. McMahon said. "The state and its localities simply could not afford to fully pre-fund the current level of benefits. The solution is to significantly restructure and reduce those benefits, and to shift the liabilities to defined-contribution retiree medical trusts supported by a combination of employer and employee contributions."

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